The Two-Way

10:24 am

Wed August 7, 2013

Freddie Mac Earns $5 Billion In 3 Months; To Pay U.S. $4.4 Billion

Freddie Mac racked up a $5 billion profit in the second quarter, the mortgage backer said in its quarterly report Wednesday. The earnings are the second-highest in the history of Freddie Mac, which has now extended its streak of profitable quarters to seven in a row.

The mortgage giant also put its net worth at $7.4 billion as of the end of June. Freddie says it will pay the U.S. Treasury a dividend of $4.4 billion, in keeping with terms of the federal aid it (along with Fannie Mae) got during the mortgage crisis. (The dividend's amount is based on any earnings above the company's reserve mark of $3 billion).

With that payment, the company says it will have paid the Treasury about $41 billion in dividends by September. The federal assistance has also left the U.S. government owning $72.3 billion in the company's preferred stock.

"Clearly our outstanding financial results continue to benefit from the turnaround in the housing market as well as our work to minimize losses and build a strong new book of business," Freddie Mac CEO Donald Layton told reporters, according to Bloomberg News.

As NPR's Ari Shapiro reported this week, the White House is pushing to change how the U.S. mortgage system works.

"President Obama wants to put private lenders out front on these long-term mortgages and use the government as a sort of backstop," Ari told All Things Considered co-host Audie Cornish. "He wants to ensure the mortgages don't go away for middle-class families. He says the private lenders could pay a fee to the government, and that would allow the government to sort of be this insurer of last resort."

Freddie Mac's strong earnings, which continue a trend that gained momentum in 2012, have attracted the attention of large investors, such as hedge fund Paulson & Co. Inc.

The fund has "been pushing Congress to abandon plans to liquidate the companies as they buy up preferred stock that has been soaring after being considered worthless, according to people with knowledge of the discussions," according to Bloomberg.

Paulson & Co. was in the news last week for its role in mortgage investments sold by former Goldman Sachs executive Fabrice "Fab" Tourre. The former trader was found liable for fraud in the deal, which resulted in a $1 billion profit for Paulson.